3 Top Dividend Champions For High Total Returns

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Dividend Champions

Income investors looking for reliable dividends and long-term growth should consider the Dividend Champions — stocks that have raised their payouts for at least 25 years in a row.

These companies have proven that they can manage through recessions, while continuing to pay dividends each year, and raise their dividends on an annual basis.

The Top Dividend Champions

These 3 Dividend Champions have long histories of dividend growth, market-beating yields, and could generate strong total returns going forward.

PPG Industries (PPG)

PPG Industries, Inc. (NYSE:PPG) is the world’s largest paints and coatings company. Its only competitors of similar size are Sherwin-Williams and Dutch paint company Akzo Nobel. With more than five decades of consecutive dividend increases, PPG Industries is a member of the Dividend Kings.

On January 18th, 2024, PPG Industries reported fourth-quarter and full-year earnings results. For the quarter, revenue grew 3.8% to a new quarterly record $4.35 billion, which topped estimates by $80 million. Adjusted net income of $363 million, or $1.53 per share, compared to adjusted net income of $286 million, or $1.22 per share, in the prior year. Adjusted earnings-per-share was $0.03 more than expected.

For the year, revenue grew 2.8% to a record $18.2 billion while adjusted earnings-per-share of $7.67 compared to $6.05 in 2022. Fourth quarter revenue results were driven by 1% organic growth, as higher prices more than offset a decline in volume. Performance Coatings revenue grew 5% to $2.62 billion. This segment benefited from higher selling prices (+3%) and favorable currency exchange (+3%) that were only partially offset by a small decline in volume (-1%).

Aerospace demand was once again strong, with organic sales up a mid-teens percentage. Demand for automotive and protective and marine coatings was solid, but the DIY channel in the U.S. and Canada was once again weak. Revenue for Industrial Coatings grew 2% to $1.74 billion.

On July 20th, 2023, PPG Industries raised its quarterly dividend 4.8% to $0.65, extending the company’s dividend growth streak to 52 consecutive years. PPG stock currently yields 1.9%.

PPG stock also looks undervalued right now. The stock has traded with an average price-to-earnings ratio of 22.3 over the last decade. But PPG shares are currently priced at 15.8 times expected 2024 earnings-per-share. The combination of future EPS growth, P/E expansion, and dividends could generate total returns above 12% per year for PPG stock.

Eversource Energy (ES)

Eversource Energy (NYSE:ES) is a diversified holding company with subsidiaries that provide regulated electric, gas, and water distribution service in the Northeast U.S. The company’s utilities serve more than 4 million customers after acquiring NStar’s Massachusetts utilities in 2012, Aquarion in 2017, and Columbia Gas in 2020.

On February 13th, 2024, Eversource Energy released its fourth quarter and full year 2023 results for the period ending December 31st, 2023. For the quarter, the company reported revenue of $2.69 billion, a decrease of 11.2% compared to $3.03 billion in the same quarter of last year.

The company reported earnings of $333.5 million and normalized earnings-per-share of $0.95 compared with earnings of $322.3 million and earnings-per-share of $0.92 in the prior year. The company reported earnings of $4.34 for 2023 compared with $4.09 per share in 2022, which reflects a year-over-year increase of 6.1%.

Earnings from the Electric Transmission segment have increased by 18.6% to $167 million compared to the same quarter in the previous year. The improvement primarily resulted from a higher level of investment in Eversource’s electric transmission system. Earnings from the Electric Distribution segment was $103.7 million, up 5.9% from the prior-year quarter. This was due to higher revenues from investments in the distribution system and a base distribution rate increase for Eversource’s Massachusetts electric business.

We expect the company to grow its earnings-per-share by 6% per year on average over the next five years. The company has a good earnings track record and will benefit from rate hikes, transmission investments, and clean energy initiatives.

The company has a long history of paying dividends and has increased its payout for 26 consecutive years. In February 2024, the quarterly dividend increased by 5.9% from $0. 6750 to $0.7150 per share.

Eversource’s target for yearly dividend growth is 5% to 7%. Eversource has increased its payout for 26 consecutive years and currently yields 4.9%.

Bank OZK (OZK)

Bank Ozk (NASDAQ:OZK) is a regional bank that offers services such as checking, business banking, commercial loans and mortgages to its customers in Arkansas, Florida, North Carolina, Texas, Alabama, South Carolina, New York and California.

In mid-January, Bank OZK reported (1/18/24) financial results for the fourth quarter of fiscal 2023. Total loans and deposits grew 27% and 28%, respectively, over last year’s quarter. Net interest income grew 9% over the prior year’s quarter, in sharp contrast to most banks, which incurred a decline in net interest income due to higher costs of deposits. Earnings-per-share grew 12%, from $1.34 to a new all-time high of $1.50, and exceeded the analysts’ consensus by $0.05. Bank OZK has exceeded the analysts’ consensus in 14 of the last 15 quarters.

The bank is well positioned in its key markets, due to the opening of new branches and inorganic growth. Bank OZK is the largest bank in its home state of Arkansas. Given also a long history and strong performance during the last financial crisis, Bank OZK is an attractive regional bank stock.

Bank OZK had grown its profits per share in almost every year since the financial crisis, which was a strong feat for a bank. In the 2011 through 2019 stretch, earnings-per-share grew by nearly 11% per year. Moreover, Bank OZK has not only been growing organically, but over the last decade the bank has repeatedly made acquisitions which management viewed as suitable.

OZK is a strong dividend growth stock. On January 2nd, 2024, Bank OZK announced a $0.38 quarterly dividend, representing a 2.7% raise over the last quarter’s payment and an 11.8% raise year-over-year. This marks the company’s 54th consecutive quarter of raising its dividend. OZK stock currently yields 3.7%.

In addition, shares of OZK appear to be undervalued based on the company’s earnings power. Our fair value estimate is 11 times earnings, in line with a typical bank. However, the stock is now trading at a 2024 price-to-earnings ratio of approximately 6.8 due to the sell-off of regional banks. Therefore, an expanding P/E multiple could significantly boost shareholder returns.

Disclosure: No positions in any stocks mentioned

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